We have extensively covered HeartCore Enterprises, Inc. (NASDAQ:HTCR) as a hyper-growth Japanese tech player that is rapidly expanding across the globe and disrupting many key markets such as digital transformation for enterprises and content management systems. The company’s cloud-based offerings are highly relevant in the post-pandemic times with businesses seeking a flexible web presence that can be accessed from a variety of devices and a reasonable level of automation in business processes through the use of process mining. In the past few months, HeartCore has had a string of interesting developments including a new product and a host of new clientele. Let us have a closer look.
HeartCore Enterprises is a high-tech software development company based in Tokyo. Its customer experience management platform includes marketing, sales, service, content management systems, and other tools and integrations that help businesses attract and retain customers at every stage of the customer journey. It also comes with all of the features necessary for successful digital marketing, such as personalized customer experiences, data-driven campaign measurements, etc. The company operates two primary business units in Japan and the United States. One is the Content Management System (CMS), a 12-year-old operating company that manages website content. The other is the Digital Transformation (DX) solutions, which offer customers task mining, process mining, and robotic process automation to help them accelerate their digital transformation. The company was established in 2009 and is based in Tokyo, Japan.
The Go IPO Offering
After HeartCore’s IPO and Nasdaq listing in February 2022, the company expanded its consulting service offering to Japanese companies seeking a Nasdaq listing. A growing number of foreign companies are turning to the United States’ capital markets, specifically the Nasdaq Stock Market, to take advantage of the many advantages of being a publicly-traded company. To capitalize on the same, HeartCore launched its first-ever consulting service Go IPO, which provides initial public offering consulting services to businesses interested in listing on the Nasdaq Stock Market. Their Go IPO service allows clients to work with a dedicated team that will guide them through the complete IPO process from start to finish. Due to increased access to capital, expansion of their capital markets footprint into the United States, and listing speed, an increasing number of foreign companies have chosen to list on Nasdaq in recent years.
HeartCore signed contracts with two companies – Moveaction Co., Ltd., and A.L.I. Technologies Inc. for its Go IPO consulting service, after only one month of launching this new consulting service. According to the agreement, the company will assist clients through Go IPO by helping with the audit and legal company hiring process, converting requested documents into English, providing general support services, preparing the S-1 or F-1 filing, and more. HeartCore expects to receive $860,000 in upfront fees from Moveaction and A.L.I. Technologies in exchange for its services. In addition, the company has received permits to purchase 3% of the fully diluted common stock of Moveaction’s and 1% of the fully diluted stock of A.L.I. Technologies’. The management has observed a growing demand for Japanese companies to list on Nasdaq which is what HeartCore can benefit from, in the long run.
Another key agreement that HeartCore signed in the recent weeks was with SYLA Holdings for its Go IPO consulting service. This is the company’s third Go IPO agreement in less than two months. HeartCore will help SYLA complete its initial public offering and list on the Nasdaq Stock Market as part of the Consulting Agreement. Go IPO will assist clients with the audit and legal firm hiring process, translating requested documents into English, assisting in the preparation of documentation for internal controls required for an IPO or de-SPAC, assisting in the preparation of the S-1 or F-1 filing, offering general support services, etc. HeartCore expects to receive $500,000 in initial fees from SYLA as compensation for its services throughout the six months. The company has also received warrants to purchase 2% of SYLA’s stock on a fully diluted basis. In the marathon of becoming a publicly-traded company, HeartCore is looking to continue growing its set of offerings like the Go IPO addition and becoming more and more relevant for international clientele. They anticipate expanding their trajectory and securing as much market share as possible as the demand for this service continues to grow.
As we can see in the above chart, the success of the Go IPO service and the new set of clienteles resulted in a slight spike in HeartCore’s share price but it was followed by another selloff. Broader markets are tough on high-growth tech stocks these days which is why HeartCore’s stock is cheap today. It is the ideal time for cash-rich companies to inspire shareholder confidence through buybacks and that is exactly what the HeartCore management has done. The company’s Board recently approved a $3.5 million share repurchase program where they will purchase HeartCore’s common stock from time to time on a discretionary basis through open market purchases, privately negotiated transactions or other means. This move should definitely build some confidence in the shareholder community. It is worth highlighting that HeartCore has a guaranteed revenue of $1.36 million from the Go IPO offering in a mere 2 months of its launch which is over and above its core CMS and process mining business. Its core businesses have generated around $11 million in revenues in the trailing 12-month period with a positive EBITDA. Despite the above spike in the stock price, HeartCore is trading at an enterprise-value-to-revenue multiple of around 3x which is ridiculously low even after the recent crash in the Nasdaq. With a gradual global expansion of clientele as well as new offerings on the horizon, we believe that HeartCore is at an exciting juncture today and certainly deserves a place in the portfolio of small-cap tech investors.